TSX - SWY LAST: 0.20 +0.00 +0% Vol: 268,546 December 12, 2018

IDENTIFY TARGETS

The first stage in diamond exploration is the identification of an area or region having the potential to host diamond deposits. Sometimes this process is simplified by a previous diamond discovery, for example, the Slave craton in Canada's Northwest Territories and Nunavut. In other circumstances, where diamond-bearing discoveries or economic deposits have yet to be realized, a variety of geological disciplines including geophysical, mineralogical, morphological and structural studies are used to direct the focus of exploration efforts.

After a region deemed to be prospective has been selected, specific target areas must be defined. This is commonly accomplished through indicator mineral sampling, an exploration technique used throughout the world by companies searching for diamonds. Results from regional scale sampling programs can be used to identify areas for mineral claim acquisition.

Geologists refer to areas that return notable concentrations of indicator minerals as “anomalous”. These areas are then further investigated by using more detailed indicator mineral sampling grids as well as geophysical techniques. Geophysical surveys allow explorers to infer the geological formations and structures that lie beneath the surficial overburden and lakes. Airborne geophysical surveys are generally used to cover large areas very rapidly. Ground-based geophysical surveys are used to refine any targets identified from airborne surveys and to further investigate potential targets identified through indicator mineral sampling, prospecting or geological mapping.

After collection, indicator mineral samples are pre-screened to remove gravel, cobbles and other large non-kimberlitic materials and then shipped to the laboratory for further processing. Stornoway's laboratory uses a flexible combination of methods to process glacial till and fluvial samples to determine the abundance and nature of the kimberlitic indicator minerals that they contain.

Initial processing begins with primary concentration through the use of a Wifley table. This device takes advantage of the higher specific gravity that characterizes indicator minerals and allows them to be separated from the other sample material through the use of a thin film of flowing water coupled with agitation. In addition, indicator mineral processing techniques utilize a variety of other methods.

TEST TARGETS

On rare occasions, it may be possible to investigate an anomaly by examining the rocks that occur as outcrop at surface, but in most cases the rock that generates the anomalous signature is buried underneath overburden or is found beneath a lake. Drilling must then be conducted to investigate the anomaly and recover samples.

A drill rig is positioned above the target and a hole is drilled. As the drill penetrates to depth, a continuous sample of the intersected rock is cored and retrieved for examination by geologists. Exploration drilling is expensive. Given that preliminary diamond analysis requires only a limited amount of kimberlite, a typical discovery is generally assessed by one or two holes. If the drill core recovered is not kimberlite, drilling of the anomaly is generally discontinued.

TEST FOR LARGER STONES

If caustic fusion test results are encouraging, the evaluation advances to the collection of bigger samples designed to recover larger-sized stones. Diamonds in kimberlites typically occur in a statistical lognormal size distribution. This means that smaller, non-commercial diamonds occur with much greater frequency than larger, commercial-size diamonds. Therefore, large samples are required to recover commercial-size diamonds.

The purpose of mini-bulk sampling is to establish whether commercial-size diamonds are present in the kimberlite. In general, these are diamonds that are larger than 1.00 mm using a square aperture screen. Given that a kimberlite cannot be mined economically if it contains only small diamonds and insufficient quantities of large diamonds, it is essential to determine the frequency of occurrence of larger stones.

Accordingly, greater volumes of material are involved at the mini-bulk sampling stage in order to achieve the goal of recovering larger diamonds from the sample. As a result, different processing techniques are required at the mini-bulk stage, including the use of a dense media separation (“DMS”) plant. This equipment is used to recover stones that are commercial-size. For mini-bulk sampling, Stornoway recovers stones greater than 0.85 mm using a square aperture screen. Recovering larger stones from a mini-bulk sample is very important, since the decision to proceed to a major bulk-sampling phase depends on confirmation that commercial-size diamonds are present.

TEST FOR GRADE AND VALUE

If mini-bulk sampling recovers a significant number of commercial-size diamonds, progressive stages of bulk sampling are required in order to estimate the grade and average value of the diamonds to establish the economic value of the kimberlite pipe. Sampling a wide area of the pipe is necessary in order to obtain a representative understanding of the diamond content of the entire body.

Diamonds recovered at this stage are studied and evaluated for size, clarity and colour, to determine the average market value. A typical population of diamonds recovered from an economic kimberlite contains the entire range of diamond quality, from industrial through to top gem quality. Because gem-quality diamonds are considerably more valuable than near-gem or industrial diamonds, the number of diamonds in the kimberlite can be less important than their quality. Therefore a low-grade kimberlite with a high proportion of gem-quality stones can be more valuable than a high-grade kimberlite with a low percentage of gem-quality diamonds.

TEST FOR ECONOMIC VIABILITY

If the grade and diamond value for a deposit are encouraging, a feasibility study is commissioned to determine the economic viability of a mining operation. The capital cost to bring a diamond deposit into production is considerable. For example, both diamond mines currently operating in the Northwest Territories were constructed at a capital cost of $900 million and $1.3 billion. In determining feasibility, many variables must be considered. The most important of these variables include the following:

  • the best approach to development of the deposit;
  • the capital cost of establishing a mine and mill;
  • the anticipated operating costs;
  • the optimum scale of operation;
  • the forecast revenues; and
  • the overall economic returns to be expected from the investment.

A full assessment of the environmental and socio-economic impacts of the proposed operation and a determination of the appropriate mitigative measures are also undertaken at this stage.

Completion of a full feasibility study and the related technical evaluation will typically require a period of two to three years.

DEVELOP A MINE

If the results of the feasibility study indicate that an adequate economic return can be expected from the investment, the principal steps that are then taken to develop and construct a mine and mill include the following:

  • securing all licences, permits and other forms of authority required for construction, commissioning and operations, including those of an environmental nature;
  • consultation with local communities in relation to socio-economic impacts and to ensure local residents and businesses are afforded the appropriate opportunity to participate in the undertaking;
  • arranging the necessary financing to complete development and construction;
  • completion of the detailed design of the mine, mill and infrastructure;
  • development of an open pit mine, an underground mine or both;
  • construction of the mill and ancillary facilities; and
  • engaging employees and contractors necessary to undertake full operations.

Development and construction are usually undertaken by contractors, commonly under the direction of one principal contractor. The overall process may take from two to five years, or more, depending on the complexity of the operation and, at the outset, the time required to obtain all necessary licences and permits.